Following the decision on Monday, January 22, by Trump to impose tariffs of up to 30% on solar cells and modules (and washing machines) imported into the U.S., the industry has been in reaction mode, with emotions ranging from the supportive, to the outraged.
In the latest news, a meeting was held in Korea yesterday, January 23, by Korean Trade Minister Kim Hyun-chong, who discussed the measures with domestic solar and washing machine makers, and response strategies to the possible impacts of the tariffs.
According to a statement on the government’s website, Kim expressed his regret at the “excessive” safeguard tariffs, and said that Korea would file a petition with the WTO.
“… the Ministry will take measures to protect its national interests against new U.S. tariffs based on the rights granted by World Trade Organization (WTO) agreements,” read the statement.
News portal, Xinhuanet reports that South Korean solar panel makers exported $1.3 billion worth of solar cells and modules to the U.S. in 2016.
Legal recourse
Mexico has also retaliated, with its Department of Economy criticizing the decision. It has threatened to use all legal means at its disposal to guarantee that the U.S. complies with the North American Free Trade Agreement.
According to the country’s Census Bureau, the U.S. imported around $1.12 billion of solar panels and $278 million of domestic washing machines from Mexico in 2016. Ildefonso Guajardo, Mexico’s Economy Secretary, said in a statement that Mexico will challenge Trump’s decision to impose duties on both kinds of products.
“Mexico will use all legal recourses for the United States to comply with its international obligations, in particular, regarding the compensation provided for in Article 802.6 of the North American Free Trade Agreement (NAFTA),” Guajardo said.
The NAFTA article mentioned in the Mexican Ministry of Economy’s statement said, “if the parties involved cannot reach an agreement on compensation, the party against whose property the measure is applied may impose measures that have substantially equivalent commercial effects […].”
The sixth round of negotiations to modernize the current trade agreement between the U.S., Mexico and Canada since 1994 began in Montreal, Canada, on Tuesday. The future of the agreement remains uncertain as negotiators from the three countries try to resolve important differences. According to Reuters, President Trump, who has regularly threatened to abandon the trade pact, which he has described as “disastrous” said the discussions were “pretty good.”
Higher costs
Bloomberg New Energy Finance (BNEF) solar analyst, Hugh Bromley estimates, similar to GTM Research, that solar PV module costs will increase by $0.10/W this year, to an average of $0.42/W. Total system costs, meanwhile, are expected to increase by under 10% for large systems, and 3% for residential rooftop systems.
“While significant, the industry has developed a buffer to absorb some of the impact: stockpiles have been built up in anticipation, exempt ‘thin-film’ manufacturing capacity has been kept online, and buyers still have access to manufacturers in tariff-exempt free-trading partners,” said Bromley.
He added, “Ultimately, there will be margin squeeze throughout the supply chain, some level of demand destruction, and potentially even more ‘demand-delay’ as projects get pushed back a few years.
Ironically, Bromley said the U.S. federal government will end up footing some of the bill for the tariff decision. “Half of any increase in system costs will be offset through the tax code via the Investment Tax Credit and depreciation,” he said.
Again in line with GTM Research, which yesterday said it forecasts an 11% reduction in the U.S. market, BNEF also said the tariffs are unlikely to spark a resurgence in U.S. manufacturing. “A tariff lasting only four years and ratcheting down quickly is unlikely to attract any manufacturing investment that was not going to occur anyways,” concluded Bromley.
Reporting contributed by Pilar Sanchez Molina
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.